A mutual fund is an investment vehicle where multiple investors come together and pool their funds. This pooled money is then invested by the fund manager across various asset classes including equity, debt, gold, and other securities to generate returns. The gains and losses incurred from such investments are divided among investors in the proportion of the share of investment.
Equity funds predominantly invest in equity shares (stocks) of various companies. So, by investing in an equity fund, an investor is a part-owner of the company the fund has invested in.
It is good to invest in equity funds because historically, in the long-run, they have given better returns than other investment options. Although you need to be patient and stay invested through ups and downs if you want to really reap the benefit of investing in them. Equity Funds invest in stock markets and markets do fluctuate. For this reason, in the short-term, the risk is higher compared to instruments like FDs. However, if you stay invested long enough, the probability of loss is almost zero and that of making good returns extremely high.
The best type of equity Fund will vary according to your need, the risk you are willing to take, and your investment horizon. To save tax, opt for ELSS which has a 3-year lock-in period. If you don't want the lock-in and tax saving option, Large Cap funds or Flexi Cap funds will fit the bill. If you can take higher risks and stay invested for at least 7 years, choose small-cap or mid-cap funds.
Professionally Managed
Liquidity
Returns
Affordability
Diversification
Well Regulated
SIP (Systematic Investment Plan)
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